FHA and conventional loans can both finance an owner-occupied duplex, triplex or fourplex. FHA requires slightly less money down, but conventional financing can have an advantage in mortgage insurance and avoids FHA's self-sufficiency test on three- and four-unit properties.
Those differences become more important on a multi-unit property than they are in a basic FHA vs. conventional loan comparison.
FHA vs. Conventional Multi-Unit Loan Basics
| Feature |
FHA |
Conventional |
| Owner-occupied 2- to 4-unit purchase |
Allowed |
Allowed |
| Potential minimum down payment |
3.5% with qualifying credit |
5% with eligible automated underwriting |
| Occupancy |
At least one borrower must occupy the property as a principal residence |
Principal-residence occupancy required for owner-occupied terms |
| Mortgage insurance |
Upfront MIP plus annual MIP |
PMI generally required above 80% LTV |
| Mortgage insurance duration |
Loan term when original LTV is above 90% |
Can generally be canceled or terminated after applicable equity requirements are met |
| 3- to 4-unit self-sufficiency test |
Yes |
No FHA-style self-sufficiency test |
| Rental income |
Eligible rent may be considered |
Eligible rent may be considered |
| Loan limits |
County-specific FHA limits |
Conforming limits set annually by FHFA |
| Assumability |
FHA-insured mortgages are assumable subject to applicable requirements |
Depends on the loan terms |
The smaller FHA down payment can matter when cash is limited. But on a triplex or fourplex, the self-sufficiency requirement can eliminate FHA as an option for a property that could still qualify conventionally.
How Conventional Multi-Unit Financing Works
Eligible conventional loans for 2- to 4-unit properties can reach 95% LTV when the property is your principal residence and the loan qualifies through automated underwriting.
That means you may be able to buy a duplex, triplex or fourplex with 5% down.
Conventional financing does not use FHA's self-sufficiency test for three- and four-unit properties. Rental income still has to meet conventional documentation and qualification rules, but the property does not have to pass the same FHA property-level rent test.
If your LTV is above 80%, private mortgage insurance will generally be required.
Unlike FHA mortgage insurance on a low-down-payment loan, borrower-paid conventional PMI does not necessarily remain for the full mortgage term.
How FHA Multi-Unit Financing Works
FHA multi-family loans can finance an eligible property with two to four units when the borrower occupies one unit as a principal residence.
HUD permits maximum 96.5% financing for borrowers with a minimum decision credit score of at least 580, meaning a minimum 3.5% down payment in a standard purchase transaction.
Borrowers with a minimum decision credit score from 500 through 579 are generally limited to 90% LTV, or at least 10% equity.
FHA also charges mortgage insurance. Most FHA purchase loans have a 1.75% upfront mortgage insurance premium, which can generally be financed into the mortgage, along with an annual MIP paid in monthly installments.
FHA also imposes an additional self-sufficiency requirement on three- and four-unit properties.
Mortgage Insurance Can Change the Long-Term Cost
The difference between 3.5% and 5% down is relatively small compared with the purchase price.
The mortgage insurance structures are much more different.
FHA Mortgage Insurance
Most FHA purchase mortgages require an upfront mortgage insurance premium equal to 1.75% of the base loan amount.
FHA also charges annual MIP. For a mortgage longer than 15 years with an original LTV above 90%, annual MIP generally remains for the full loan term.
That includes a typical FHA purchase with 3.5% down.
Getting rid of the MIP on that type of FHA loan generally requires paying off the mortgage, such as through a sale or refinance. A refinance requires you to qualify for a new loan under the rates and requirements available at that time.
The rules for removing FHA mortgage insurance depend on the loan's origination date, term and original LTV.
Conventional Private Mortgage Insurance
Conventional borrower-paid PMI generally applies when the loan exceeds 80% of the property's value.
For many covered conventional mortgages, you can request PMI cancellation when the principal balance is scheduled to reach 80% of the home's original value, subject to requirements such as payment history and being current on the loan.
PMI generally terminates automatically when the scheduled balance reaches 78% of the home's original value if the borrower is current.
The broader mortgage insurance requirements by loan type differ significantly between FHA and conventional financing.
Example: $500,000 Duplex
Assume you are buying a $500,000 duplex and will occupy one side.
| Item |
FHA at 3.5% Down |
Conventional at 5% Down |
| Purchase price |
$500,000 |
$500,000 |
| Down payment |
$17,500 |
$25,000 |
| Base loan amount |
$482,500 |
$475,000 |
| Upfront mortgage insurance |
$8,443.75 at 1.75% |
No FHA UFMIP |
| Loan amount if FHA UFMIP is financed |
$490,943.75 |
$475,000 before any financed costs |
The FHA option saves $7,500 on the down payment in this example.
But if the FHA upfront premium is financed, the starting FHA mortgage balance is about $15,944 higher than the conventional balance.
FHA annual MIP would also apply. On this example's base loan amount and a typical 30-year FHA loan above 95% LTV, the current 0.55% annual premium would initially equal roughly $2,654 per year, or about $221 per month before accounting for the declining loan balance.
A comparable conventional PMI premium cannot be calculated from the down payment alone. Private mortgage insurance pricing varies based on the borrower, loan and coverage.
That is why the useful comparison is the actual monthly mortgage insurance shown on each quote rather than assuming FHA or conventional will always cost less.
FHA's Self-Sufficiency Test Applies to Triplexes and Fourplexes
The FHA self-sufficiency test can be the biggest difference between the two programs for a three- or four-unit property.
HUD requires three- and four-unit FHA properties to generate enough net market rental income to cover the monthly principal, interest, taxes and insurance.
The calculation uses the appraiser's fair market rent for all units, including the unit you plan to occupy.
HUD subtracts the greater of:
- The appraiser's estimate for vacancies and maintenance, or
- 25% of total fair market rent.
If the 25% factor applies, that effectively means 75% of the total market rent must cover PITI.
Example: A Fourplex That Does Not Pass
Assume the appraiser estimates each of four units could rent for $1,800 per month.
| Calculation |
Amount |
| Total market rent |
$7,200 |
| 75% of market rent |
$5,400 |
| Monthly PITI |
$5,650 |
| Shortfall |
$250 |
The property does not produce enough net self-sufficiency rental income to cover its PITI under this example.
The FHA loan would not satisfy the self-sufficiency requirement even if your personal income were otherwise enough to qualify.
A conventional mortgage does not apply this FHA-specific test.
This distinction does not apply to an FHA-financed duplex. HUD's self-sufficiency test applies to three- and four-unit properties.
FHA vs. Conventional Down Payment
For an eligible owner-occupied 2- to 4-unit purchase, the basic difference can be just 1.5 percentage points.
| Purchase Price |
3.5% FHA Down Payment |
5% Conventional Down Payment |
Difference |
| $400,000 |
$14,000 |
$20,000 |
$6,000 |
| $500,000 |
$17,500 |
$25,000 |
$7,500 |
| $700,000 |
$24,500 |
$35,000 |
$10,500 |
The FHA minimum down payment can reduce the cash needed at closing.
But down payment should not be compared in isolation. Include mortgage insurance, interest rate, points or lender credits, closing costs and the resulting monthly payment.
Credit Requirements Are Different
FHA explicitly ties its maximum financing to minimum decision credit score thresholds.
A score of at least 580 can qualify for maximum FHA financing under HUD's standard rules. Scores between 500 and 579 are generally limited to 90% LTV.
Conventional credit requirements are more dependent on the specific agency, underwriting method, LTV and overall loan file.
There is not one universal conventional minimum score that applies to every 2- to 4-unit transaction.
A borrower who does not qualify for a high-LTV conventional multi-unit loan may therefore still have an FHA path, but credit score is only one part of either underwriting decision.
DTI Depends on the Underwriting Method
Neither program should be reduced to a single universal debt-to-income limit.
For manually underwritten FHA loans, HUD generally uses 31% housing and 43% total DTI as the standard ratios. Certain borrowers with scores of at least 580 and documented compensating factors can reach higher manual-underwriting ratios, including as high as 40% housing and 50% total DTI with the required factors.
Automated FHA underwriting can produce different results based on the full loan file.
For conventional loans, Fannie Mae Desktop Underwriter can permit total DTI up to 50% in eligible cases, while manually underwritten limits are generally lower.
Rental income from the other units can also change the calculation for either program.
FHA and Conventional Loan Limits Differ
Both programs have loan limits, but they are calculated differently.
For 2026, the baseline conventional conforming limits in most of the country are:
| Property Size |
2026 Baseline Conventional Limit |
2026 FHA Low-Cost Floor |
| 2 units |
$1,066,250 |
$693,050 |
| 3 units |
$1,288,800 |
$837,700 |
| 4 units |
$1,601,750 |
$1,041,125 |
FHA limits vary by county and can be substantially higher in high-cost markets. Conventional conforming limits also rise in designated high-cost areas.
In a lower-cost county, however, the conventional limit can be considerably higher than the FHA floor for the same number of units.
This difference can rule out FHA financing on some higher-priced small multi-unit properties even when the buyer otherwise qualifies.
Which Program Changes Most by Unit Count?
Duplex
A duplex is the most straightforward FHA-versus-conventional comparison because FHA's self-sufficiency test does not apply.
When buying a duplex, the comparison is more heavily driven by down payment, mortgage insurance, credit, rate and total monthly cost.
Triplex
The triplex financing comparison changes because FHA's self-sufficiency test applies.
FHA may require less money down, but a triplex with insufficient market rent can fail the FHA property-level test. Conventional financing does not use that same test.
Fourplex
The same FHA self-sufficiency requirement applies when buying a fourplex.
A fourplex also has the highest loan limits of the residential 1- to 4-unit categories, making the difference between FHA county limits and conventional conforming limits more important on higher-priced properties.
How Each Program Uses Rental Income
Both FHA and conventional financing can potentially consider rent from units you will not occupy.
But the calculations are not identical.
For a conventional Fannie Mae purchase, the lender generally uses 75% of documented gross rent when calculating qualifying rental income.
FHA also uses rental-income calculations for qualification. For three- and four-unit properties, however, FHA separately applies its self-sufficiency test using market rent from all units.
That means the same property's rent can be relevant in two different ways on an FHA triplex or fourplex: borrower qualification and the property-level self-sufficiency test.
Do FHA Loans Have Lower Rates?
FHA and conventional mortgages are priced differently, and the lower quoted interest rate does not necessarily identify the lower-cost loan.
An FHA quote may have a different interest rate than a conventional quote for the same borrower, but FHA mortgage insurance affects both the upfront and monthly cost.
Conventional pricing can also vary significantly with credit, LTV and other loan characteristics.
Compare the interest rate, APR, mortgage insurance and cash to close using quotes produced at approximately the same time.
The same principle applies when comparing FHA and conventional loans when mortgage rates are elevated.
Run Both Scenarios
A small difference in down payment can produce larger differences elsewhere in the loan.
When using an FHA vs. conventional calculator, enter the same purchase price and realistic rate assumptions for both options.
Then compare:
- Down payment
- Initial loan balance
- Upfront FHA MIP
- Monthly FHA MIP or conventional PMI
- Principal and interest
- Total estimated monthly payment
- Cash needed at closing
- How long mortgage insurance is expected to remain
For a triplex or fourplex, also confirm whether the property itself can satisfy FHA's self-sufficiency requirement before treating FHA as an available option.
Which Loan Structure May Fit Your Situation?
| Situation |
What to Compare Closely |
| You have limited cash for a down payment |
FHA's 3.5% minimum against conventional's potential 5% minimum, including FHA UFMIP |
| You are buying a duplex |
Mortgage insurance, credit requirements, rate and monthly payment because FHA's self-sufficiency test does not apply |
| You are buying a triplex or fourplex |
Whether the property passes FHA's self-sufficiency test before comparing the remaining costs |
| You expect to keep the mortgage for many years |
How long FHA MIP or conventional PMI remains on the loan |
| The property price is relatively high |
The FHA county loan limit compared with the applicable conventional conforming limit |
| Your credit profile makes conventional high-LTV financing difficult |
FHA eligibility alongside the full cost of FHA mortgage insurance |
Bottom Line
FHA and conventional loans can both finance an owner-occupied duplex, triplex or fourplex.
FHA can reduce the minimum down payment from 5% to 3.5% for qualifying borrowers, but it also adds upfront and annual mortgage insurance. With less than 10% down, FHA annual MIP generally remains for the loan term.
For a duplex, the comparison largely comes down to qualification and total cost. For a triplex or fourplex, first determine whether the property can pass FHA's self-sufficiency test. If it cannot, conventional financing may remain an option even when FHA does not.
FAQ
Can You Buy a 4-Unit Property With an FHA Loan?
Yes. FHA can finance an eligible four-unit property when you occupy one unit as your principal residence. The property must also pass FHA's self-sufficiency test, which requires its net appraiser-supported market rent to cover the monthly principal, interest, taxes and insurance.
What Is the FHA Self-Sufficiency Test?
The FHA self-sufficiency test applies to three- and four-unit properties. HUD uses the appraiser's market rent from all units and subtracts the greater of estimated vacancy and maintenance or 25% of market rent. The resulting net rental income must be sufficient to cover PITI.
Does FHA Mortgage Insurance Ever Go Away?
It depends on the original LTV and loan term. On a typical FHA purchase with 3.5% down and a term longer than 15 years, annual MIP lasts for the loan term. FHA loans originated at 90% LTV or less generally have an 11-year annual MIP period.
Is FHA or Conventional Better for a Duplex?
Compare the full loan offers rather than only the down payment. FHA can require 3.5% down, while eligible conventional financing can require 5%. Conventional PMI can eventually end, while FHA MIP generally lasts for the loan term on a 3.5%-down purchase. FHA's self-sufficiency test does not apply to duplexes.
What Are the FHA Loan Limits for 2- to 4-Unit Properties?
For 2026, FHA's low-cost floors are $693,050 for two units, $837,700 for three units and $1,041,125 for four units. FHA limits vary by county and can be higher in high-cost areas, so the limit for the property's location should be checked before applying.
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